EFG Financial Research Hub

EFG Asset Management identifies a period of significant fragility for the UK economy, driven by a confluence of external geopolitical shocks and internal political instability. Global conflicts involving Iran and the US-Israel have triggered a dramatic 50% surge in gas prices, significantly exceeding current energy price cap benchmarks. In response to these pressures, the Bank of England anticipates inflation could reach 6% under adverse conditions, necessitating a pivot toward tighter monetary policy. Domestically, the research highlights a leadership crisis within the Labour Party following local election losses as a primary driver of market volatility. This political uncertainty has pushed 30-year Gilt yields to 5.8%, a level that surpasses the peaks observed during the 2022 fiscal crisis. Overall, EFG's analysis suggests a challenging macroeconomic outlook characterized by high inflationary risks and deteriorating sovereign debt conditions.